Financial Analysis

3. BUSINESS COMBINATION On February 9, 2026, we completed the acquisition of all of the issued and outstanding membership interests of APM, a manufacturer of precision machined components and assemblies for the medical, aerospace and defense industries. The aggregate purchase price was $ 8,650,000 of which $ 6,650,000 was paid in cash through a new term loan (Term Loan D) we borrowed from UMB Bank, N.A. (See Note 9) and $ 2,000,000 of which is to be paid by the Company under the terms of a sixty-three month promissory note (the Subordinated Promissory Note) issued to Advanced-Precision Machining Holding Company, Inc., the former owner of APM. The Subordinated Promissory Note bears interest at 8% per annum and requires twenty-one quarterly payments of principal and accrued interest in the approximate amount of $ 118,000 . This Subordinated Promissory Note is subordinate to all debt issued under our Second Amended and Restated Credit and Security Agreement with UMB Bank, N.A. The following table summarizes the consideration paid and the estimated fair value of the assets acquired and liabilities assumed for APM as of the acquisition date of February 9, 2026 (in thousands). Schedule of assets acquired and liabilities assumed APM Purchase Price Allocation Consideration: Cash $ 6,650 Promissory note payable to seller 2,000 Total Consideration $ 8,650 Fair value of assets acquired and liabilities assumed: Cash $ 155 Inventory 875 Accounts receivable 426 Fixed assets 977 Prepaids an …

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11. COMMITMENTS AND CONTINGENCIES Leases We lease our corporate office under an agreement that expires in September 2027. Our corporate office lease requires us to pay insurance, taxes, and other expenses related to the leased space. We assumed the APM leases for its office, production and warehouse facility in Costa Mesa, California in February 2026 which expire on December 31, 2026. Rent expense for our corporate office in fiscal 2026 and 2025 was $ 617,000 and $ 609,000 , respectively. Rent expense recorded for the APM facility was $ 83,000 in fiscal 2026. Additionally, beginning in fiscal 2025 we began renting on a month-to-month basis some parking spaces at a neighboring location near our Franklin Property. In fiscal 2026 and 2025, we incurred rent expense in the amount of $ 36,000 and $ 23,000 , respectively, for parking. Compensation Arrangements Retirement Savings 401(k) Plan The Pro-Dex, Inc. Retirement Savings 401(k) Plan (the 401(k) Plan) is a defined contribution plan we administer that covers substantially all our employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. Employees are eligible to participate in the 401(k) Plan when they have attained 19 years of age and then can enter into the 401(k) Plan on the first of the month following 60 days of service. The 401(k) Plan was amended effective February 9, 2026, to allow employees of Advanced Precision Machining, LLC to participate. Participants are eligible …

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9. NOTES PAYABLE AND FINANCING TRANSACTIONS UMB Bank, N.A. (UMB) We have several outstanding term loans as well as a revolving loan (the Amended Revolving Loan) with UMB (formerly Minnesota Bank & Trust or MBT). The Company entered into a Second Amended and Restated Credit and Security Agreement (the Amended Credit Agreement) with UMB Bank, N.A. on February 9, 2026, which among other things provided for financing to fund the cash portion of the purchase price of APM as described in Note 3 by issuing Term Loan D in the principal amount of $ 6,650,000 . The Amended Credit Agreement also extended the maturity date of the Amended Revolving Loan from December 29, 2026, to December 29, 2027, pursuant to a Third Amended and Restated Revolving Credit Note entered into by the Company and UMB on February 9, 2026. Loan origination fees in the amount of $ 31,625 were paid to UMB in connection with the Amended Credit Agreement. Advanced Precision Machining (APM) Subordinated Promissory Note On February 9, 2026 in connection with the acquisition of APM as described in Note 3, we issued the seller a promissory note in the amount of $ 2,000,000 which bears interest at 8% per annum and requires twenty-one equal quarterly payments of principal and accrued interest in the amount of approximately $118,000 each. The promissory note contains covenants and obligations of the Company customary for a subordinated promissory note of this type. The balance on our outstanding loans at June 30, 2026 …

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Schedule of disaggregation of net sales Year ended June 30, 2026 2025 Net Sales: Over-time revenue recognition $ 1,650 $ 698 Point-in-time revenue recognition 75,898 65,895 Total net sales $ 77,548 $ 66,593

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12. SHARE-BASED COMPENSATION Stock Option Plans Our 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of June 30, 2026, performance awards for 200,000 shares of common stock, non-qualified stock options for 372,000 shares of common stock, and 33,500 restricted shares of common stock have been granted under the 2016 Equity Incentive Plan. Performance Awards In December 2017, the Compensation Committee of our Board of Directors granted 200,000 performance awards to our employees which were to be paid in shares of our common stock. Whether any performance awards were to vest, and the amount that vests were tied to the completion of service periods ranging from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. The awards were expected to vest in increments of 40,000 shares, or five distinct tranches, biannually beginning July 1, 2018, through July 1, 2026. The Compensation Committee reallocated 48,000 , 17,500 and 15,200 forfeited performance awards during fiscal 2020, fiscal 2022, and fiscal 2024 respectively, having the same remaining terms and conditions to other current employees. The performance awards granted and reallocated were recorded at estimated fair value using a Monte …

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5. FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income, and cost approaches is permissible. We consider the principal or most advantageous market in which it would transact and assumptions that market participants would use when pricing the asset or liability. Fair Value Hierarchy . The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial instruments categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels. We have categorized our cash equivalents and investments within the fair value hierarchy as follows: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets include our money market accounts, …

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8. INCOME TAXES The provision for income taxes consists of the following amounts (in thousands): Schedule of provision for income taxes Years Ended June 30, 2026 2025 Current: Federal $ 3,685 $ 2,114 State 797 826 Deferred: Federal (99 ) 76 State (30 ) 64 Income tax expense $ 4,353 $ 3,080 The effective income tax rate from income from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages). Schedule of reconciliation federal statutory income tax rates Years Ended June 30, 2026 2025 Amount Percent Pretax Income Amount Percent Pretax Income Income before income taxes $ 18,015 100 % $ 12,058 100 % Computed expected income tax expense on income before income taxes $ 3,783 21 % $ 2,532 21 % State tax, net of federal benefit 663 3 % 964 8 % Tax incentives (57 ) (149 ) (1 %) Nontaxable or nondeductible items 44 Uncertain tax position (73 ) (116 ) (1 %) Stock based compensation (164 ) (1 %) Other (7 ) 13 Income tax expense $ 4,353 24 % $ 3,080 26 % Deferred income taxes reflect the net effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands): Schedule of deferred income tax assets and liabilities June 30, 2026 2 …

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10. LEASES Our operating lease ROU asset and long-term liability are presented separately on our consolidated balance sheet. Additionally, we acquired some equipment leases in conjunction with our acquisition of APM in the third quarter of fiscal 2026. The current portion of our lease liabilities exclusive of imputed interest, as of June 30, 2026, in the amount of $ 844,000 , is presented within accrued expenses on the consolidated balance sheet. As of June 30, 2026, the maturity of our lease liabilities is as follows: Schedule of maturities of lease liabilities s Operating Leves Finance Leases Fiscal Year: 2027 $ 567 $ 330 2028 143 223 2029 175 2030 58 Total lease payments 710 786 Less imputed interest (26 ) (65 ) Total $ 684 $ 721 As of June 30, 2026 and 2025, our operating lease for our office, production, and warehouse facility in Irvine, California (our corporate office) has a remaining lease term of 1.25 years and 2.25 years, respectively, and an imputed interest rate of 5.3% . Our lease agreement does not provide an implicit rate and, as a result, we used our estimated incremental borrowing rate at the time we adopted ASC 842 to determine the present value of future lease payments. The APM equipment financing leases have interest rates ranging from 3.99% to 7.79%. Cash paid for amounts included in the lease liability for the fiscal years ended June 30, 2026 and 2025 was $ 713,000 and $ 535,000 , respectively. …

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Recently Adopted Accounting Pronouncements In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606), which clarifies the application of derivative accounting to certain contracts and updates the guidance for share-based noncash consideration received from a customer in exchange for goods and services. Specifically, this ASU introduces a scope exception for contracts that are not exchange-traded and whose underlying is tied to operations or activities specific to one of the parties to the contract. It also clarifies the guidance for share-based consideration from a customer. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted and the option to apply on a prospective or modified retrospective basis. The Company early adopted this ASU on a prospective basis as of July 1, 2025. The Company expects this ASU to reduce the cost and complexity associated with analyzing and applying the derivative guidance to contracts with underlyings based on operations or activities specific to one of the parties of the contract, such as the contingent consideration received in exchange for the Companys shares of common stock in Monogram Technologies, Inc. (Monogram) described more fully in Note 5. In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvement to Income Tax Disclosures, wh …

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies presented below is designed to assist the reader in understanding our consolidated financial statements. Such consolidated financial statements and related notes are the representations of management, who is responsible for their integrity and objectivity. In the opinion of management, these accounting policies conform to accounting principles generally accepted in the United States of America (U.S. GAAP) in all material respects and have been consistently applied in preparing the accompanying consolidated financial statements. Net Sales Net sales consists of the sale of products and services, as well as shipping and handling billed to our customers and is net of volume rebates and discounts and excludes sales tax. Revenue Recognition Revenue from product sales is recognized as promulgated by the Financial Accounting Standards Board (FASB) in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers once our contract(s) with a customer and the performance obligations in the contract have been identified, and the transaction price has been allocated to the performance obligations and revenue is recorded when (or as) we satisfy each performance obligation, generally upon shipment. At June 30, 2026, we had a backlog of $ 32.9 million compared with a backlog of $ 50.4 million at June 30, 2025. Our backlog represents firm purchase orders received and acknowledged fro …

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15. COMMON STOCK Share Repurchase Program In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the prior repurchase plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these shares repurchase programs, our Board approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor provided by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (10b5-1 Plan or Plan). During the fiscal year ended June 30, 2026, we repurchased 79,898 shares at an aggregate cost, inclusive of fees under the Plan, of $ 3.4 million. During the fiscal year ended June 30, 2025, we repurchased 130,148 shares at an aggregate cost, inclusive of fees under the Plan, of $ 3.5 million. On a cumulative basis, since 2013 we have repurchased a total of 1,591,395 shares under the share repurchase programs at an aggregate cost, inclusive of fees under the Plan, of $ 27.6 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. …

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16. SUBSEQUENT EVENTS We have evaluated subsequent events through the date of this filing. On July 1, 2026, the Compensation Committee determined that the fifth and final tranche of performance awards for 40,000 shares of common stock had vested. Each participant elected a net share settlement to cover applicable withholding taxes, and, accordingly, the Company issued 25,230 shares of common stock and paid $ 926,000 of participant-related payroll tax liabilities. Other than as described above and elsewhere in these consolidated financial statements, there were no subsequent events that require disclosure.

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NOTE 15. COMMITMENTS AND CONTINGENCIES Legal Matters We may be involved from time to time in various legal proceedings arising either in the ordinary course of our business or incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse.

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NOTE 12. NOTES PAYABLE AND FINANCING TRANSACTIONS UMB Bank, N.A. (UMB) We have several outstanding term loans as well as a revolving loan (the Amended Revolving Loan) with UMB (formerly Minnesota Bank & Trust or MBT). The Company entered into a Second Amended and Restated Credit and Security Agreement (the Amended Credit Agreement) with UMB Bank, N.A. on February 9, 2026, which among other things provided for financing to fund the cash portion of the purchase price of APM as described in Note 3 by issuing Term Loan D in the principal amount of $6,650,000. The Amended Credit Agreement also extended the maturity date of the Amended Revolving Loan from December 29, 2026 to December 29, 2027, pursuant to a Third Amended and Restated Revolving Credit Note entered into by the Company and UMB on February 9, 2026. Loan origination fees in the amount of $31,625 were paid to UMB in connection with the Amended Credit Agreement. Advanced Precision Machining (APM) Subordinated Promissory Note On February 9, 2026 in connection with the acquisition of APM as described in Note 3, we issued the seller a promissory note in the amount of $ 2,000,000 which bears interest at 8% per annum and requires twenty-one equal quarterly payments of principal and accrued interest in the amount of approximately $ 118,000 each. The promissory note contains covenants and obligations of the Company customary for a subordinated promissory note of this type. The balance on our outstanding loans (in thousands) …

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NOTE 10. SHARE-BASED COMPENSATION Our 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of March 31, 2026, performance awards for 200,000 shares of common stock, non-qualified stock options for 372,000 shares of common stock, and 33,500 restricted shares of common stock have been granted under the 2016 Equity Incentive Plan. Performance Awards During both the three months ended March 31, 2026 and 2025, we recorded share-based compensation expense of $ 7,000 related to outstanding performance awards. During both the nine months ended March 31, 2026, and 2025, we recorded share-based compensation expense of $ 20,000 related to outstanding performance awards. On March 31, 2026, there was approximately $ 7,000 of unrecognized compensation cost related to non-vested performance awards, which is expected to be expensed over a weighted-average period of three months. On July 1, 2024, it was determined by the Compensation Committee that the vesting of performance awards for 40,000 shares of common stock had been achieved. Each participant elected a net issuance to cover their individual withholding taxes and, therefore, we issued participants 25,134 shares of common stock and paid $ 273,000 of participant-related payroll tax liabilities. Non-Qualified …

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NOTE 9. INCOME TAXES Deferred income taxes are provided on a liability method whereby deferred tax assets and liabilities are recognized for temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more - likely - than - not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based primarily on our historical taxable income, with some consideration given to our estimates of future taxable income by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. Our deferred tax asset is net of a valuation allowance in the gross amount of $ 90,000 as of both March 31, 2026 and June 30, 2025 . We recognize accrued interest and penalties related to unrecognized tax benefits when applicable. The effective tax rate for the three months ended March 31, 2026 and 2025 was 26% and 28% , respectively. The decline in the effective tax rate for the three months ended March 31, 2026 compared to the prior fiscal year is largely due to the creation of state tax nexus …

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NOTE 14. LEASES Our operating lease right-of-use asset and long-term term lease liabilities are presented separately on our condensed consolidated balance sheets. Additionally, we acquired some equipment leases in conjunction with our acquisition of APM in the third quarter of fiscal 2026. The current portion of our operating lease liability as of March 31, 2026, in the amount of $ 838,000 , is presented within accrued liabilities on the condensed consolidated balance sheets. As of March 31, 2026, our operating lease related to our corporate office has a remaining lease term of one year and six months and an imputed interest rate of 5.53% . Cash paid for rent inclusive of common area maintenance charges for the three and nine months ended March 31, 2026 totaled $ 156,000 and $ 456,000 , respectively, and for the three and nine months ended March 31, 2025 totaled $ 149,000 and $ 442,000 , respectively. As of March 31, 2026, the maturity of our lease liabilities is as follows (in thousands): Schedule of maturities of lease liabilities Operating Leases Fiscal Year: 2026 227 2027 897 2028 362 2029 175 2030 51 Total lease payments 1,712 Less imputed interest: (36 ) Total $ 1,676

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Recently Issued and Not Yet Adopted Accounting Pronouncements In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (DISE) . The ASUs purpose is to improve disclosures about a public business entitys expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general and administrative, and research and development). This ASU is effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating these new expanded disclosure requirements, but this standard will not impact our results of operations or financial position. In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic 270): Narrow-scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The C …

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NOTE 4. NET SALES The following table presents the disaggregation of net sales by revenue recognition model (in thousands): Schedule of disaggregation of net sales Three Months Ended March 31, Nine Months Ended March 31, 2026 2025 2026 2025 Net Sales: Over-time revenue recognition $ 531 $ 186 $ 1,156 $ 274 Point-in-time revenue recognition 19,418 17,228 55,987 48,825 Total net sales $ 19,949 $ 17,414 $ 57,143 $ 49,099 The timing of revenue recognition, billings, and cash collections results in billed accounts receivables , unbilled receivables or contract assets (presented as deferred costs on our condensed consolidated balance sheets), and customer advances and deposits (presented as deferred revenue on our condensed consolidated balance sheets), where applicable. Amounts are generally billed as work progresses in accordance with agreed upon milestones. The over-time revenue recognition model consists of non-recurring engineering (NRE) and prototype services and typically relates to NRE services related to the evaluation, design, or customization of a medical device and is typically recognized over time utilizing an input measure of progress based on costs incurred compared to the estimated total costs upon completion. During the three and nine months ended March 31, 2026, we recorded $ 122,000 and $ 202,000 , respectively, of revenue that had been included in deferred revenue in the prior fiscal year. During the three and nine months ended March 31, 2025, we recorded $ 0 an …

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NOTE 13. COMMON STOCK Share Repurchase Program In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the prior repurchase plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these share repurchase programs, our Board approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor provided by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (10b5-1 Plan or Plan). During the three and nine months ended March 31, 2026, we repurchased 14,422 and 69,422 shares, respectively, at an aggregate cost, inclusive of fees under the Plan, of $ 0.6 million and $ 2.8 million, respectively. During both the three and nine months ended March 31, 2025, we repurchased 130,148 shares at an aggregate cost, inclusive of fees under the Plan, of $ 3.5 million. On a cumulative basis, since implementation of the share repurchase program in 2013, we have repurchased a total of 1,580,919 shares under the share repurchase program at an aggregate cost, inclusive of fees, of $ 27.0 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. As of March 31, 2026, our cumulative stock repurchases have exceeded our recorded value of common stock, and the excess has been reflected as a shareholder distribution, reducing our consolidated retained earnings. …

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NOTE 16. SUBSEQUENT EVENTS We have evaluated subsequent events through the date of this filing. There were no subsequent events that require disclosure.

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